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Cyprus: Tax incentives and benefits for innovation, R&D

Tax incentives in Cyprus

In Cyprus, the income tax law has been amended with the introduction of more detailed rules regarding the tax benefit provided for investors with respect to “innovative businesses” that are in line with the European Acquis, specifically concerning state aid rules.


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Innovative small and medium size enterprises (SMEs) will receive approval by a designated authority on the basis of the SME’s research and development (R&D) expenses. The rules refer to accounting standards that will be used to determine R&D expenses (thereby moving away from the restrictive concept of scientific research).

The incentive is available to Cypriot tax resident individuals who are independent private investors and who proceed with risk finance investments, either directly or through an investment fund (in the manner defined in the income tax law), or through an alternative trading platform, to innovative SMEs. The regime provides for an income tax deduction with respect to the investment (subject to certain limitations).


Read a January 2017 report prepared by the KPMG member firm in Cyprus

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